BOGOTA, Colombia, Feb. 26, 2015 /CNW/ - Today, researchers from the Universidad de los Andes, Colombia, and the School of Public Policy at the University of Calgary, Canada released a joint report on the state of taxation of the mining industry in Colombia. The report also included a comprehensive comparison of the Colombian fiscal regime with those of other Latin American countries that have significant mining industries.

The results show the need to improve the mining tax regime in Colombia. Authored by Duanjie Chen of The School of Public Policy and Guillermo Perry, former Colombian minister of finance and public credit, and minister of mining and energy, the report concludes that the Colombian regime imposes a very high tax burden on marginal investments in mining. Further, the tax regime discriminates across minerals and is regressive with respect to project profitability. This is mainly due to the existence of differential royalty rates by mineral, based on the gross value of sales at mine mouth, which are in some cases inordinately high and that represent a large fraction of total Government revenue from mining. For these same reasons the actual regime taxes most mines excessively during periods of low prices, while failing to capture a significant part of net revenues in periods of high prices.

To deal with these deficiencies, the report recommends the introduction of a resource rent tax and a reduction of royalty rates to a common five per cent across minerals. In doing so, the Colombian mining tax regime could gain significantly in efficiency and competitiveness compared to other mining countries, while augmenting revenues during price booms (when operational margins increase sharply), especially from the most profitable mature mining projects. Overall, this reform would make the tax regime more neutral, lower administrative costs, make Colombia more competitive and attract investment while also preserving a reasonable revenue stream to the government and people of Colombia.